Investigative report, Arizona Historical Society, conflict of interest and procurement, violations by agency officials a report to the Arizona Legislature

A REPORT
TO THE
ARIZONA LEGISLATURE
Debra K. Davenport
Auditor General
Arizona
Historical Society–
Conflict of Interest and Procurement
Violations by Agency Officials
Special Investigative Unit
August • 2002
Investigative Report
The Auditor General is appointed by the Joint Legislative Audit Committee, a bipartisan committee composed of five
senators and five representatives. Her mission is to provide independent and impartial information and specific
recommendations to improve the operations of state and local government entities. To this end, she provides financial
audits and accounting services to the State and political subdivisions, investigates possible misuse of public monies, and
conducts performance audits of school districts, state agencies, and the programs they administer.
The Joint Legislative Audit Committee
Representative Roberta L. Voss, Chair Senator Ken Bennett, Vice Chair
Representative Robert Blendu Senator Herb Guenther
Representative Gabrielle Giffords Senator Dean Martin
Representative Barbara Leff Senator Peter Rios
Representative James Sedillo Senator Tom Smith
Representative James Weiers (ex-officio) Senator Randall Gnant (ex-officio)
Investigative Staff
George Graham, Manager and Contact Person
Theresa Day, Lead Investigator
Holly Frook
Copies of the Auditor General’s reports are free.
You may request them by contacting us at:
Office of the Auditor General
2910 N. 44th Street, Suite 410 • Phoenix, AZ 85018 • (602) 553-0333
Additionally, many of our reports can be found in electronic format at:
www.auditorgen.state.az.us
2910 NORTH 44th STREET • SUITE 410 • PHOENIX, ARIZONA 85018 • (602) 553-0333 • FAX (602) 553-0051
DEBRA K. DAVENPORT, CPA
AUDITOR GENERAL
STATE OF ARIZONA
OFFICE OF THE
AUDITOR GENERAL
WILLIAM THOMSON
DEPUTY AUDITOR GENERAL
August 28, 2002
Members of the Arizona Legislature
The Honorable Jane Dee Hull, Governor
Board of Directors
Arizona Historical Society
The Honorable Janet Napolitano
Office of the Attorney General
We have conducted a special investigation of the Arizona Historical Society for the period
August 1999 through December 2000. Our investigation was performed to determine whether
there were conflict-of-interest and procurement violations during that period and whether the
Agency’s business practices were consistent with legal requirements.
Our investigation consisted primarily of inquiries and the examination of selected financial
records and other documentation. Therefore, our investigation was substantially less in scope
than an audit conducted in accordance with generally accepted auditing standards.
Accordingly, we do not express an opinion on the Agency’s financial records or internal
control structure, nor do we ensure that all matters involving the internal control structure
established by the American Institute of Certified Public Accountants or other conditions that
may require correction or improvement have been disclosed.
The accompanying Investigative Report describes our findings and conclusion as a result of
this special investigation.
After this report is distributed to the members of the Arizona State Legislature, the Governor,
and the Attorney General, it becomes public record.
Sincerely,
Debbie Davenport
Auditor General
Enclosure
Our investigation revealed that from August 1999 to December
2000, certain Arizona Historical Society (Agency) officials violated
conflict-of-interest statutes and the Procurement Code. As a result
of our investigation, the Attorney General has taken criminal action
against the Southern Arizona Division Director. See the Conclusion
on page 9.
Certain Agency officials violated the State’s conflict-of-interest
statutes by misrepresenting themselves to City of Tucson officials
and/or concealing pertinent information from Board members in
order to obtain personal benefits for themselves or their relatives.
􀁺􇩔 The Southern Arizona Division Director misused his employment status with the
Agency to unlawfully receive monies through a City grant program in which he
personally solicited City funds, using the Agency as the proposing entity.
􀁺􇩉 In addition, the Board President improperly participated in the hiring of his son-in-
law as an Agency lobbyist, which contributed to the Agency’s restrictive
competitive practices.
Finally, Agency officials expended at least $28,515 in violation of procurement
regulations.
􀁺􇩁 Agency officials failed to obtain any price quotations before hiring the lobbyist
referred to above.
􀁺􇩁 Agency officials also violated the Procurement Code when purchasing other
goods and services.
page i
Office of the Auditor General
SUMMARY
Investigation Highlights:
􀁺􇩁 Agency officials violated
conflict-of-interest statutes.
􀁺􇩁 Agency officials failed to
comply with procurement
regulations for purchases
totaling over $28,000.
page ii
State of Arizona
page iii
Office of the Auditor General
TABLE OF CONTENTS
concluded
1
3
3
4
7
9
1
2
Background
Finding 1: Agency officials violated conflict-of-interest
statutes
The Southern Arizona Division Director improperly used his
employment status with the Agency to unlawfully receive personal
income
Board President may have improperly influenced the Agency to
contract with his relative
Finding 2: Agency officials improperly
purchased goods and services
Conclusion
Exhibits:
1 Total Agency Revenues Fiscal Year 2001
2 Arizona Historical Society Governing Structure
page iv
State of Arizona
The Arizona Historical Society is a state agency whose mission is to collect, preserve,
interpret, and disseminate the history of Arizona, the West, and northern Mexico as it
pertains to Arizona.
In fiscal year 2001, the Agency’s $5.7 million total revenue included
both private and state funding. State appropriations accounted for
$4.5 million, or 80 percent, of the total annual revenues. The
remainder of the Agency’s revenue is obtained through donations,
grants, and other private sources such as membership dues. These
private monies are held by public officials in their official capacity.
Consequently, these monies are legally considered to be public
monies, and must be accounted for and treated as public monies.
page1
Office of the Auditor General
BACKGROUND
Exhibit 1: Total Agency Revenues
Fiscal Year 2001
Private Sources
$1.2 million
20%
Appropriations
$4.5 million
80%
Source: Auditor General staff analysis of the Arizona Historical Society’s Statement of Revenues, Expenditures, and Changes
in Fund Balances for the year ended June 30, 2001.
The Agency consists
of an 81-member staff
with $5.7 million in total
annual revenues
consisting of both
private and state
funding.
A.R.S. §41-821 establishes a Board of Directors that holds in trust for the
State all property acquired by the Agency. Further, the Board directs and
oversees the Agency’s operations. The Board is composed of 31 voting
members, who govern the Agency and its 81-member staff. The Board is
elected by the Agency’s membership, which includes over 2,000 citizen
members to date. Since its establishment in 1912, the Agency’s process
to elect the Board of Directors has remained relatively unchanged.
In addition, the Board of Directors established an Executive Committee,
which has full authority to act for the Board of Directors. Further, the Agency has four
divisions, located in Tucson, Tempe, Yuma, and Flagstaff. The Board has established
a chapter within each division. These chapters conduct fund-raising, advise the
division museum directors on museum programs and exhibits, and advocate for
each chapter’s needs to the Board of Directors. The presidents of these chapters
also serve on the Board.
page2
State of Arizona
Board of
Directors
31 members
Executive
Committee
6 members
Chapter Board
Central
Arizona Division
Tempe
Chapter Board
Rio Colorado
Division
Yuma
Chapter Board
Northern
Arizona Division
Flagstaff
Chapter Board
Southern
Arizona Division
Tucson
Source: Auditor General staff analysis of Arizona Revised Statutes and Arizona Historical Society records.
Exhibit 2: Arizona Historical Society
Governing Structure
The Agency’s process
used to elect its Board of
Directors is based on
laws that have remained
relatively unchanged for
almost 90 years.
Agency officials violated conflict-of-interest
statutes
During the period August 1999 to December 2000, certain Agency officials
disregarded the State’s conflict-of-interest statutes by misrepresenting themselves
and/or concealing pertinent information from Board members or other outside
interests in order to obtain personal benefits for themselves or their relatives totaling
over $22,000. Their inappropriate actions may have harmed the Agency by limiting
competition and compromising its reputation.
The Southern Arizona Division Director improperly used
his employment status with the Agency to unlawfully
receive personal income
State law restricts an employee of a public agency from receiving
additional compensation for services personally performed regarding
any matter pending before the agency for which he is an employee.
In order to obtain additional personal income, the Southern Arizona
Division Director misrepresented to City of Tucson officials that the
Arizona Historical Society was the responsible party for services he
personally performed in relation to one of the City’s grant projects.
Consequently, he and his subordinate inappropriately received
personal income of $13,000.
The Southern Arizona Division Director submitted a grant proposal to the City of
Tucson soliciting monies for the Agency to plan and design a historical exhibit in
Tucson. In the grant proposal, he listed the Arizona Historical Society as the
page3
Office of the Auditor General
FINDING 1
The Southern Arizona
Division Director improperly
used his employment status
with the Agency to unlawfully
receive personal income of
$13,000 for himself and his
subordinate.
proposing entity and himself, with his professional title, as the contact person.
However, the Southern Arizona Division Director did not obtain permission from the
Agency’s Board of Directors or Executive Director to apply for monies from the City
on behalf of the Agency. In fact, he did not completely inform any of his superiors of
his involvement or the Agency’s involvement with this grant.
The Southern Arizona Division Director identified the Agency as the grant recipient on
the grant proposal and other written communication with the City. Yet, he solicited his
subordinate, the Exhibit Director, to personally complete a portion of the grant project
prior to the City’s approval of any grant monies to the Agency. Once the City of
Tucson approved the grant to the Agency, the Southern Arizona Division Director
requested that the City write the final contract for and issue payment directly to his
subordinate’s personal business. However, because the City Council approved the
grant believing that the Agency was completing the project, the City required the
Southern Arizona Division Director to sign the contract in his official capacity
representing the Agency’s responsibility for the completed grant project. The
Southern Arizona Division Director signed the contract without notifying the Agency
of the awarded grant monies or their responsibility regarding the final grant project.
After the grant monies were deposited into the Exhibit Director’s personal business
account, he and the Southern Arizona Division Director split the monies and received
$6,500 each.
Further, the Southern Arizona Division Director and the Exhibit Director did not
document their partnership on the Agency’s mandatory disclosure statement after
the grant proposal was submitted to the City. Likewise, neither employee completed
the Agency forms requesting permission for outside employment.
Board President may have improperly influenced the
Agency to contract with his relative
State law restricts public officers from participating in any manner in contracts, sales,
or purchases for which they have a substantial interest and requires them to make
known that interest publicly in the agency’s official records. However, the Board
President improperly participated in the recruitment of his son-in-law as a lobbyist for
the Agency by facilitating several phone conversations and setting up at least one
meeting with his son-in-law and the Agency’s interim Executive Director.
Subsequently, the Executive Committee hired the Board President’s son-in-law for
$9,750 to provide the Agency lobbyist services during a 3-month period, without
evaluating the services of any other potential vendors. Despite his improper
page4
State of Arizona
The Board President
was a significant
participant in the hiring of
his son-in-law as a
lobbyist for the Agency.
page5
Office of the Auditor General
involvement and failure to file the required conflict disclosure, the Board President did
properly abstain from the vote to hire his son-in-law as the Agency’s lobbyist.
However, without the Board President’s vote, a quorum did not exist, so
the vote to award a contract to the lobbyist was not valid.
Finally, the Agency has never maintained a conflict-of-interest file
available for public inspection, as required by law. All disclosure
statements completed by Agency employees are filed in the employee’s
confidential personnel file and are therefore not available for public
inspection. In addition, most Agency officials do not have access to
these files. Further, Directors were unaware of their responsibility to
complete disclosure statements for any conflicts they may have.
With only three out of six
committee members voting to
hire the lobbyist, the Agency
did not have a majority vote
required to award a valid
contract.
page6
State of Arizona
page7
Office of the Auditor General
FINDING 2
Agency officials improperly purchased goods
and services
During the period January 2000 to August 2000, Agency officials
improperly procured goods and services totaling over $28,000.
Agency officials failed to solicit competitive price quotations or
obtain authorization from the State Purchasing Office when
spending monies received from private sources. Because these
monies are held by public officials in their official capacity, they
are subject to the same spending restrictions as appropriations
and other public monies. State agencies are required, for
purchases exceeding their specified spending limits, to use
contracts competitively procured by the State Purchasing Office or to obtain
permission from that Office to issue their own request for competitive solicitations.
State agencies have no purchasing authority beyond the limits established by statute
or the State Purchasing Office. The Agency’s specified spending limit was $5,000
until June 6, 2000.
From January through June 2000, Agency officials purchased over
$23,500 of goods and services without following the State’s
Procurement Code.
􀁺􇩔 The Executive Committee hired the Board President’s son-in-law
for $9,750 in lobbying services. Agency officials spent
almost twice their allowable spending limit of $5,000 without
obtaining price quotations or contacting the State Purchasing
Office for authorization to expend these monies. In addition,
the Agency did not include in the lobbyist’s contract the State
Procurement Office’s Uniform Terms and Conditions required
for all state agencies.
The Agency failed to
comply with the
procurement code when
purchasing goods and
services totaling over
$28,000.
The Agency spent
almost twice its
allowable spending
limit to hire a lobbyist
without following any
competitive
procurement process.
􀁺􇩆 Further, Agency officials made six other purchases totaling $13,969 for items
such as furniture and lodging for independent contractors without obtaining the
required oral or written price quotations for purchases ranging from $1,001 to
$5,000.
Because Agency officials did not comply with the Procurement Code when spending
monies received from private sources, competition for these purchases was limited
and the Agency may not have received the best value for the services received.
Further, by failing to include the State Procurement Office’s Uniform Terms and
Conditions within the lobbyist contract, Agency officials failed to protect the Agency
from possible legal action by the lobbyist or other parties to the contract.
During June 2000, the Department of Administration reduced the Agency’s specified
spending limit from $5,000 to $1,000 with clear instructions that all monies the
Agency received are required to be expended in strict compliance with Arizona’s
Procurement Code. However, in July and August 2000, the Agency failed to follow the
Department of Administration’s recommendation and spent an additional $5,000 for
professional services and building materials without adhering to any competitive
process.
page8
State of Arizona
page9
Office of the Auditor General
On August 28, 2002, Jerry Kyle, former Arizona Historical Society Southern Arizona
Division (Tucson) Director, pled guilty to one count of theft and agreed to pay
restitution of $6,500 to the Arizona Historical Society.
CONCLUSION
page10
State of Arizona

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A REPORT
TO THE
ARIZONA LEGISLATURE
Debra K. Davenport
Auditor General
Arizona
Historical Society–
Conflict of Interest and Procurement
Violations by Agency Officials
Special Investigative Unit
August • 2002
Investigative Report
The Auditor General is appointed by the Joint Legislative Audit Committee, a bipartisan committee composed of five
senators and five representatives. Her mission is to provide independent and impartial information and specific
recommendations to improve the operations of state and local government entities. To this end, she provides financial
audits and accounting services to the State and political subdivisions, investigates possible misuse of public monies, and
conducts performance audits of school districts, state agencies, and the programs they administer.
The Joint Legislative Audit Committee
Representative Roberta L. Voss, Chair Senator Ken Bennett, Vice Chair
Representative Robert Blendu Senator Herb Guenther
Representative Gabrielle Giffords Senator Dean Martin
Representative Barbara Leff Senator Peter Rios
Representative James Sedillo Senator Tom Smith
Representative James Weiers (ex-officio) Senator Randall Gnant (ex-officio)
Investigative Staff
George Graham, Manager and Contact Person
Theresa Day, Lead Investigator
Holly Frook
Copies of the Auditor General’s reports are free.
You may request them by contacting us at:
Office of the Auditor General
2910 N. 44th Street, Suite 410 • Phoenix, AZ 85018 • (602) 553-0333
Additionally, many of our reports can be found in electronic format at:
www.auditorgen.state.az.us
2910 NORTH 44th STREET • SUITE 410 • PHOENIX, ARIZONA 85018 • (602) 553-0333 • FAX (602) 553-0051
DEBRA K. DAVENPORT, CPA
AUDITOR GENERAL
STATE OF ARIZONA
OFFICE OF THE
AUDITOR GENERAL
WILLIAM THOMSON
DEPUTY AUDITOR GENERAL
August 28, 2002
Members of the Arizona Legislature
The Honorable Jane Dee Hull, Governor
Board of Directors
Arizona Historical Society
The Honorable Janet Napolitano
Office of the Attorney General
We have conducted a special investigation of the Arizona Historical Society for the period
August 1999 through December 2000. Our investigation was performed to determine whether
there were conflict-of-interest and procurement violations during that period and whether the
Agency’s business practices were consistent with legal requirements.
Our investigation consisted primarily of inquiries and the examination of selected financial
records and other documentation. Therefore, our investigation was substantially less in scope
than an audit conducted in accordance with generally accepted auditing standards.
Accordingly, we do not express an opinion on the Agency’s financial records or internal
control structure, nor do we ensure that all matters involving the internal control structure
established by the American Institute of Certified Public Accountants or other conditions that
may require correction or improvement have been disclosed.
The accompanying Investigative Report describes our findings and conclusion as a result of
this special investigation.
After this report is distributed to the members of the Arizona State Legislature, the Governor,
and the Attorney General, it becomes public record.
Sincerely,
Debbie Davenport
Auditor General
Enclosure
Our investigation revealed that from August 1999 to December
2000, certain Arizona Historical Society (Agency) officials violated
conflict-of-interest statutes and the Procurement Code. As a result
of our investigation, the Attorney General has taken criminal action
against the Southern Arizona Division Director. See the Conclusion
on page 9.
Certain Agency officials violated the State’s conflict-of-interest
statutes by misrepresenting themselves to City of Tucson officials
and/or concealing pertinent information from Board members in
order to obtain personal benefits for themselves or their relatives.
􀁺􇩔 The Southern Arizona Division Director misused his employment status with the
Agency to unlawfully receive monies through a City grant program in which he
personally solicited City funds, using the Agency as the proposing entity.
􀁺􇩉 In addition, the Board President improperly participated in the hiring of his son-in-
law as an Agency lobbyist, which contributed to the Agency’s restrictive
competitive practices.
Finally, Agency officials expended at least $28,515 in violation of procurement
regulations.
􀁺􇩁 Agency officials failed to obtain any price quotations before hiring the lobbyist
referred to above.
􀁺􇩁 Agency officials also violated the Procurement Code when purchasing other
goods and services.
page i
Office of the Auditor General
SUMMARY
Investigation Highlights:
􀁺􇩁 Agency officials violated
conflict-of-interest statutes.
􀁺􇩁 Agency officials failed to
comply with procurement
regulations for purchases
totaling over $28,000.
page ii
State of Arizona
page iii
Office of the Auditor General
TABLE OF CONTENTS
concluded
1
3
3
4
7
9
1
2
Background
Finding 1: Agency officials violated conflict-of-interest
statutes
The Southern Arizona Division Director improperly used his
employment status with the Agency to unlawfully receive personal
income
Board President may have improperly influenced the Agency to
contract with his relative
Finding 2: Agency officials improperly
purchased goods and services
Conclusion
Exhibits:
1 Total Agency Revenues Fiscal Year 2001
2 Arizona Historical Society Governing Structure
page iv
State of Arizona
The Arizona Historical Society is a state agency whose mission is to collect, preserve,
interpret, and disseminate the history of Arizona, the West, and northern Mexico as it
pertains to Arizona.
In fiscal year 2001, the Agency’s $5.7 million total revenue included
both private and state funding. State appropriations accounted for
$4.5 million, or 80 percent, of the total annual revenues. The
remainder of the Agency’s revenue is obtained through donations,
grants, and other private sources such as membership dues. These
private monies are held by public officials in their official capacity.
Consequently, these monies are legally considered to be public
monies, and must be accounted for and treated as public monies.
page1
Office of the Auditor General
BACKGROUND
Exhibit 1: Total Agency Revenues
Fiscal Year 2001
Private Sources
$1.2 million
20%
Appropriations
$4.5 million
80%
Source: Auditor General staff analysis of the Arizona Historical Society’s Statement of Revenues, Expenditures, and Changes
in Fund Balances for the year ended June 30, 2001.
The Agency consists
of an 81-member staff
with $5.7 million in total
annual revenues
consisting of both
private and state
funding.
A.R.S. §41-821 establishes a Board of Directors that holds in trust for the
State all property acquired by the Agency. Further, the Board directs and
oversees the Agency’s operations. The Board is composed of 31 voting
members, who govern the Agency and its 81-member staff. The Board is
elected by the Agency’s membership, which includes over 2,000 citizen
members to date. Since its establishment in 1912, the Agency’s process
to elect the Board of Directors has remained relatively unchanged.
In addition, the Board of Directors established an Executive Committee,
which has full authority to act for the Board of Directors. Further, the Agency has four
divisions, located in Tucson, Tempe, Yuma, and Flagstaff. The Board has established
a chapter within each division. These chapters conduct fund-raising, advise the
division museum directors on museum programs and exhibits, and advocate for
each chapter’s needs to the Board of Directors. The presidents of these chapters
also serve on the Board.
page2
State of Arizona
Board of
Directors
31 members
Executive
Committee
6 members
Chapter Board
Central
Arizona Division
Tempe
Chapter Board
Rio Colorado
Division
Yuma
Chapter Board
Northern
Arizona Division
Flagstaff
Chapter Board
Southern
Arizona Division
Tucson
Source: Auditor General staff analysis of Arizona Revised Statutes and Arizona Historical Society records.
Exhibit 2: Arizona Historical Society
Governing Structure
The Agency’s process
used to elect its Board of
Directors is based on
laws that have remained
relatively unchanged for
almost 90 years.
Agency officials violated conflict-of-interest
statutes
During the period August 1999 to December 2000, certain Agency officials
disregarded the State’s conflict-of-interest statutes by misrepresenting themselves
and/or concealing pertinent information from Board members or other outside
interests in order to obtain personal benefits for themselves or their relatives totaling
over $22,000. Their inappropriate actions may have harmed the Agency by limiting
competition and compromising its reputation.
The Southern Arizona Division Director improperly used
his employment status with the Agency to unlawfully
receive personal income
State law restricts an employee of a public agency from receiving
additional compensation for services personally performed regarding
any matter pending before the agency for which he is an employee.
In order to obtain additional personal income, the Southern Arizona
Division Director misrepresented to City of Tucson officials that the
Arizona Historical Society was the responsible party for services he
personally performed in relation to one of the City’s grant projects.
Consequently, he and his subordinate inappropriately received
personal income of $13,000.
The Southern Arizona Division Director submitted a grant proposal to the City of
Tucson soliciting monies for the Agency to plan and design a historical exhibit in
Tucson. In the grant proposal, he listed the Arizona Historical Society as the
page3
Office of the Auditor General
FINDING 1
The Southern Arizona
Division Director improperly
used his employment status
with the Agency to unlawfully
receive personal income of
$13,000 for himself and his
subordinate.
proposing entity and himself, with his professional title, as the contact person.
However, the Southern Arizona Division Director did not obtain permission from the
Agency’s Board of Directors or Executive Director to apply for monies from the City
on behalf of the Agency. In fact, he did not completely inform any of his superiors of
his involvement or the Agency’s involvement with this grant.
The Southern Arizona Division Director identified the Agency as the grant recipient on
the grant proposal and other written communication with the City. Yet, he solicited his
subordinate, the Exhibit Director, to personally complete a portion of the grant project
prior to the City’s approval of any grant monies to the Agency. Once the City of
Tucson approved the grant to the Agency, the Southern Arizona Division Director
requested that the City write the final contract for and issue payment directly to his
subordinate’s personal business. However, because the City Council approved the
grant believing that the Agency was completing the project, the City required the
Southern Arizona Division Director to sign the contract in his official capacity
representing the Agency’s responsibility for the completed grant project. The
Southern Arizona Division Director signed the contract without notifying the Agency
of the awarded grant monies or their responsibility regarding the final grant project.
After the grant monies were deposited into the Exhibit Director’s personal business
account, he and the Southern Arizona Division Director split the monies and received
$6,500 each.
Further, the Southern Arizona Division Director and the Exhibit Director did not
document their partnership on the Agency’s mandatory disclosure statement after
the grant proposal was submitted to the City. Likewise, neither employee completed
the Agency forms requesting permission for outside employment.
Board President may have improperly influenced the
Agency to contract with his relative
State law restricts public officers from participating in any manner in contracts, sales,
or purchases for which they have a substantial interest and requires them to make
known that interest publicly in the agency’s official records. However, the Board
President improperly participated in the recruitment of his son-in-law as a lobbyist for
the Agency by facilitating several phone conversations and setting up at least one
meeting with his son-in-law and the Agency’s interim Executive Director.
Subsequently, the Executive Committee hired the Board President’s son-in-law for
$9,750 to provide the Agency lobbyist services during a 3-month period, without
evaluating the services of any other potential vendors. Despite his improper
page4
State of Arizona
The Board President
was a significant
participant in the hiring of
his son-in-law as a
lobbyist for the Agency.
page5
Office of the Auditor General
involvement and failure to file the required conflict disclosure, the Board President did
properly abstain from the vote to hire his son-in-law as the Agency’s lobbyist.
However, without the Board President’s vote, a quorum did not exist, so
the vote to award a contract to the lobbyist was not valid.
Finally, the Agency has never maintained a conflict-of-interest file
available for public inspection, as required by law. All disclosure
statements completed by Agency employees are filed in the employee’s
confidential personnel file and are therefore not available for public
inspection. In addition, most Agency officials do not have access to
these files. Further, Directors were unaware of their responsibility to
complete disclosure statements for any conflicts they may have.
With only three out of six
committee members voting to
hire the lobbyist, the Agency
did not have a majority vote
required to award a valid
contract.
page6
State of Arizona
page7
Office of the Auditor General
FINDING 2
Agency officials improperly purchased goods
and services
During the period January 2000 to August 2000, Agency officials
improperly procured goods and services totaling over $28,000.
Agency officials failed to solicit competitive price quotations or
obtain authorization from the State Purchasing Office when
spending monies received from private sources. Because these
monies are held by public officials in their official capacity, they
are subject to the same spending restrictions as appropriations
and other public monies. State agencies are required, for
purchases exceeding their specified spending limits, to use
contracts competitively procured by the State Purchasing Office or to obtain
permission from that Office to issue their own request for competitive solicitations.
State agencies have no purchasing authority beyond the limits established by statute
or the State Purchasing Office. The Agency’s specified spending limit was $5,000
until June 6, 2000.
From January through June 2000, Agency officials purchased over
$23,500 of goods and services without following the State’s
Procurement Code.
􀁺􇩔 The Executive Committee hired the Board President’s son-in-law
for $9,750 in lobbying services. Agency officials spent
almost twice their allowable spending limit of $5,000 without
obtaining price quotations or contacting the State Purchasing
Office for authorization to expend these monies. In addition,
the Agency did not include in the lobbyist’s contract the State
Procurement Office’s Uniform Terms and Conditions required
for all state agencies.
The Agency failed to
comply with the
procurement code when
purchasing goods and
services totaling over
$28,000.
The Agency spent
almost twice its
allowable spending
limit to hire a lobbyist
without following any
competitive
procurement process.
􀁺􇩆 Further, Agency officials made six other purchases totaling $13,969 for items
such as furniture and lodging for independent contractors without obtaining the
required oral or written price quotations for purchases ranging from $1,001 to
$5,000.
Because Agency officials did not comply with the Procurement Code when spending
monies received from private sources, competition for these purchases was limited
and the Agency may not have received the best value for the services received.
Further, by failing to include the State Procurement Office’s Uniform Terms and
Conditions within the lobbyist contract, Agency officials failed to protect the Agency
from possible legal action by the lobbyist or other parties to the contract.
During June 2000, the Department of Administration reduced the Agency’s specified
spending limit from $5,000 to $1,000 with clear instructions that all monies the
Agency received are required to be expended in strict compliance with Arizona’s
Procurement Code. However, in July and August 2000, the Agency failed to follow the
Department of Administration’s recommendation and spent an additional $5,000 for
professional services and building materials without adhering to any competitive
process.
page8
State of Arizona
page9
Office of the Auditor General
On August 28, 2002, Jerry Kyle, former Arizona Historical Society Southern Arizona
Division (Tucson) Director, pled guilty to one count of theft and agreed to pay
restitution of $6,500 to the Arizona Historical Society.
CONCLUSION
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State of Arizona